Terms and concepts Flashcards
Types of monetary damages
- Reliance - what was lost in relying on the contract (the “cost” measure)
- Restitution - restore benefit conferred
- Expectation - as if contract was completed (gross contract price - expenses to be incurred in performing the contract
Statute of Frauds (contracts subject to)
MOUSER
Marriage
One-year (cannot be performed within one year)
UCC goods contracts for $500+
Suretyship (3 party where one guarantees debt of another should they default)
Executor/administrator of an estate (promising to pay a debt of the estate personally)
Realty
Note that in a combined contract for services and the sale of goods, SoF applies only if the primary purpose of the contract was for the sale of goods and services were incidental. Otherwise, common law applies (one-year provision).
Note that partial performance negates the requirement.
Requirements of a writing (SoF) - UCC vs. common law
Common law: Subject matter / Parties’ identities / Promises (and by/to whom) / Essential terms with reasonable clarity / Signature of the party to be charged
Common law voidable requirements for misrepresentation
- Misrepresentation must have been either fraudulent or material
- The misrepresentation must have induced the recipient to make the contract, and
- The recipient must have been justified in relying on the misrepresentation.
Undue influence
Unfair persuasion;
Unfair resulting bargain;
Contract voidable by victim.
“Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare. If a party’s manifestation of assent is induced by undue influence by the other party, the contract is voidable by the victim.”
Rs. 2d § 177 (1)-(2). This rule protects a person only “if he is under the domination of another or is justified, by virtue of his relation with another in assuming that the other will not act inconsistently with his welfare.”
Rs. 2d § 177, cmt. a. When it comes to determining unfair persuasion, “the ultimate question is whether the result was produced by means that seriously impaired the free and competent exercise of judgment. Such factors as the unfairness of the resulting bargain, the unavailability of independent advice, and the susceptibility of the person persuaded are circumstances to be taken into account in determining whether there was unfair persuasion, but they are not in themselves controlling.”
Rs. 2d § 177, cmt. b. “If a party’s assent has been induced by the undue influence of a third person rather than that of the other party to the contract, the contract is nevertheless voidable by the victim.”
Offer requirements under common law and UCC
Common law: (SQIP) Subject matter / Quantity / Identity of parties / Price
UCC: (SQI) Subject matter / Quantity / Identity of parties
Note: UCC will include gap filler for price (market price)
Contract modification - Common law vs. UCC
Common law - requires consideration for a binding modification
UCC - no consideration required for modification if the parties entered into the modification in GOOD FAITH
Note that UCC sales $500 or greater must be IN WRITING to satisfy the SoF; however, partially performed contracts are an exception to SoF.
Merchant (definition under UCC)
§2-104. “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
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Abridged: A person who deals in the goods of the kind or who possesses knowledge and skill to the goods involved or to whom such knowledge and skill may be attributed to their profession.
Effective delivery/communication of acceptance and revocation/rejection
Acceptance is effective upon dispatch per the mailbox rule (must be addressed correctly with proper postage)
Rejection/revocation, conversely, must be effectively communicated (even indirectly, such as a buyer learning that someone else has already bought the item)
Irrevocable offers
Common law: consideration is required to make an offer irrevocable (e.g. option contract)
UCC: exception to CL is a UCC firm offer, which is made by a merchant (buyer does not have to be a merchant). It must be:
- In writing
- Explicit promise not to revoke the offer
- Signed by merchant
A UCC firm offer will last as long as stated in the offer or a reasonable period of time, not to exceed 90 days.
For both UCC and common law, a unilateral offer is irrevocable once offeree starts performance
Detrimental reliance - irrevocable if offeree detrimentally relies on the offer in a foreseeable manner
UCC gap fillers
Where there are conflicting terms in an agreement, the mirror image rule of common law does not apply. The UCC will apply a gap filler and the majority of courts will “knock out” the conflicting terms.
Payment terms - COD
Assignment of rights under Restatements 2nd and UCC
Common law - contract barring assignment will be effective and allow obligor to sue, but the assignment will still be valid in spite of an agreement to the contrary.
Once an assignor assigns right to assignee, assignor may no longer sue obligor due to breach (only assignee may sue). Note that the assignor is still on the hook, however, and may be sued by obligor.
UCC - will not be effective if withheld unreasonably
Assignment of rights, even if explicitly prohibited under a contract, will not prevent buyer from suing seller (where buyer was assignee under the contract)
If a seller refuses to allow a buyer to inspect goods upon delivery, is there a breach under UCC?
Yes, except where the contract specifically calls for payment before inspection, the UCC allows for inspection (remember, perfect tender under UCC, not substantial performance - buyer has a right to perfect tender). If the buyer refuses payment prior to inspection and the agreement calls for payment before inspection, there is a breach by the buyer (not repudiation).
When are liquidated damages enforceable?
Damages can only be liquidated under the following circumstances: when the court will put a QAP on damages:
Q -If an injury is “difficult to quantify” or “uncertain.”
A - The sum must be reasonable and include any actual or likely damages.
P - Cannot be a “penalty.”
Liquidated damages clauses will be voided if these stipulations are not met.
The damages should not be a penalty. Monetarily unequal to the harm done, penalties serve as a reason to not break the contract, and are allowed when the obligations of a contract were not fulfilled. The reason these payments are considered damages instead of penalties can be traced back to courts of equity, which attempted to deter parties from making Unconscionable bargains.
Place of delivery - merchant and non-merchant
Merchant to non-merchant - place of delivery is hands of buyer (risk of loss transferred upon receipt in hands of buyer)
Non-merchant - place of delivery is location of seller upon completion of deal/payment (risk of loss transferred to buyer)
To third-party carrier - Where silent as to hands of carrier or buyer, title passes to buyer once on board a third-party carrier.
A “shipment” contract - Where silent as to hands of carrier or buyer, title passes to buyer once on board a third-party carrier.
Destination contract - Risk of loss shifts to buyer when goods are duly tendered to the buyer.
